In a release, CARE Ratings said that it expects the recently-announced waiver of ISTS charges to benefit 20 GW of upcoming wind and solar power capacity.
“Given the current circumstances, this extension provides a timely boost to the renewable sector. The total capacity which would directly get benefited would be around 20 GW. The 20 GW capacity does not include 12 GW of module manufacturing linked capacity as they already enjoy the benefit of ISTS waiver. Given the extension in waiver provided to all ISTS projects, the advantage to module manufacturing linked capacity would be blunted to an extent. Also, the additional burden of the waiver would have to be borne by Power Grid Corporation of India Ltd (PGCIL) and the respective state distribution utilities,” the release said.
This 20 GW of capacity includes 15 GW of bid out ISTS capacity currently under implementation, 4 GW worth of RfS (request for selection) issued for ISTS projects and 1 GW coming from expected tenders under ISTS route.
It may be recalled that the Union Ministry of Power on June 21, 2021, announced waiver of Inter-State Transmission (ISTS) charges on transmission of electricity generated from wind and solar projects by another two years.
Under this announcement, solar and wind projects which will be commissioned up to June 30, 2025, no ISTS charges shall be levied. The earlier timeline for ISTS waiver was for the projects to be commissioned up to June 30, 2023.
The key beneficiaries of such a waiver are likely to be:
- Solar and wind energy projects which are delayed due to disruption caused by COVID-19 pandemic and other factors and were expected to be commissioned after June 30, 2023.
- Solar and wind energy projects where construction is yet to begin given delay in Power Purchase Agreements (PPA) /Power Supply Agreements (PSA) signing leading to execution timelines going beyond June 30, 2023.
- Pumped storage hydro and battery energy storage systems projects which were earlier not part of such waiver.
Waiver on trading
The order also waived off ISTS charges for renewable power that is traded on the power exchanges till June 30, 2023. This will enable increased trading of power from renewable energy sources which has not been the case so far and provide an alternative market to renewable IPPs.
Impact on solar and wind projects
The primary intention of this scheme was to enhance capacity addition in solar and wind energy through providing waivers on ISTS charges so that ambitious target of 175 GW capacity could be met by December 31, 2022. The said extension of waiver shall provide relief to all under implementation solar and wind energy projects and newly bid out projects as there have been delays due to disruption caused by COVID-19 pandemic.
Also, the implementation schedules of under construction projects for already bidded out capacity have been hampered. This is due to delays in signing of PPAs which in turn are getting delayed due to reluctance by various state discoms on signing back-to-back Power PSAs given the declining trend in tariffs. The said waiver benefit would also be passed on to the ongoing bids provided the projects are completed before June 30, 2025.
